Apple and Samsung Maneuver How to Handle 2nd Damages Trial - Now or After Appeal? ~pj

Monday, April 01 2013 @ 06:16 PM EDT

Every time I look away for a bit from the Apple v. Samsung post-trial motions saga, they file a zillion more. So I have them all for you, bringing us up to date since the last time we looked in. And I'll explain a little bit, so you'll be fortified against some peculiar
spin in a side show championed by Fortune. But the issues are much deeper and more nuanced than Fortune seems to notice, as I'll try to show you.

The current moves result from Judge Lucy Koh's ruling ordering a new trial on 14 Samsung products to recalculate the damages owed to Apple, because, she ruled, the jury awarded damages on those products based on a legally impermissible theory. In the vernacular, they goofed, so the math was wrong. It was so messed up by the jury, and so untraceable as to methodology followed, she couldn't fix it for them but rather decided to order a new damages trial instead. But on other products and on Samsung's counterclaims, she said the jury's rulings should stand, subject to appeal.

It's the new trial in particular that is causing strategic maneuvering. When should it happen? The judge encouraged the parties to wait until after the appeals court rules on whether or not there were errors in the first trial. Except for the 14 products, the rest is ready to be ordered as a partial final judgment. Samsung would like the judge to do exactly that, while also ordering a stay pending the appeal, saying it makes sense to wait in that "the Federal Circuit’s decision will shape the course of any new trial, including issues related to patent validity,
trade dress dilution, liability instructions and the proper measure of damages."

But Apple wants to go forward with the damages trial right away, before these issues can be resolved. Ask yourself why.

What's being spun is that Apple could get even higher damages in a second damages trial. And while that is conceivable for one brief shining moment if certain planets align just so for Apple in a quick second damages jury trial, the truth is, if Apple thought it was likely to get more damages after appeal, it wouldn't be in such a rush to get the trial done first, before the appeals court can decide if the district court made mistakes of law that prejudiced Samsung in the first trial. That indicates to me that Apple knows full well what the end of this saga is likely to be, that the appeals court is very likely to rule Samsung's way on at least some of its appeal issues -- including some which could impact any numbers a quick second jury might come up with -- and Apple would like a PR win before the final chapter reduces its damages figure to a more reasonable figure, if any. Keep in mind that juries typically do order more in damages than judges. But judges get the last word.

By "if any" I mean that Samsung's position is that some of Apple's patents are not valid to begin with, and if they prevail there, there are no damages to pay. That's not likely either, but then neither is a higher damages figure than the first wacko jury decided on, and my point is that even if a second jury did do it, the appeal is most likely to do what Judge Koh already did, which is tug on the string and bring the balloon back down to earth's atmosphere. But there are many possible outcomes, depending on what Judge Koh decides to do, which is why the parties are fighting so hard over this.

Apple wants an immediate damages trial, I believe, precisely because it is likely to do better before the appeals court speaks. Some things are just obvious. And Apple's current maneuvers, I think, strengthen that impression. I'll show you and you can make up your own mind.

Samsung, of course, believes there were mistakes made by Judge Koh in the first trial, and it wants the appeals court to review those errors, as it sees them, so that the new damages trial isn't full of the same errors, thus necessitating a third trial. If there's a stay until they hear what the appeals court thinks of the way the first trial was handled, it's just more efficient.
If you recall, the Samsung counterclaims were denied by the jury completely, and Samsung believes that was in error. If the appeals court agrees with Samsung, then Samsung might conceivably be due damages from Apple, which would offset any damages owed. Plus, Samsung believes that the jury ordered damages on 9 of the 14 products improperly in that Samsung believes that the damages were based on unprotectable intellectual property of Apple's, and if the appeals court agrees that no damages should be paid on those 9, then there's really no need to include them in any second trial. Not only that, but if it agrees that some of the IP is unprotectable, then it could bounce the second damages trial out of the box, because there'd be no damages to calculate. Samsung writes, "For example, if the Federal Circuit holds unprotectable any of the Apple intellectual property that underlies both Apple’s claims against the nine products as to which the jury found damages and the 14 products as to which new trial has been ordered, any new trial will not need to address Apple’s claims as to that intellectual property."
There are also issues about damages and notice dates on trade dress. So there are many scenarios, not just one. They are all at least conceivable.

If you listened to the oral argument on the issue of sealing or not sealing evidentiary documents at the Federal Circuit the other day, you may have noticed that one judge asked whether or not the judge had issued a final order on the sealing issue. The question in the air was whether or not it was too soon to even hear an appeal, because you have to have a final order in order to appeal as of right.

So what to do about the fact that some issues in this case were decided with finality, while damages on 14 products are still up on the air? Samsung started by asking, in harmony with the the judge's encouragement to wait for the appeals court to speak, for a partial final judgment but also a stay, pending appeal. Apple opposes, asking for a scheduling conference on April 3rd to get the second trial going right away, which Samsung opposes. If you were Apple, you'd likely prefer to go forward right away too, in that Samsung is surely going to argue on appeal that the district court judge made errors of law in the first trial, and some of that -- if Samsung wins even one issue -- impacts the second trial in a way that reduces Apple's odds of getting anything like what it did from the first jury.

Here are the introductions to the motions, to give you an idea of what it's all about.

On March 1, 2013, following this Court’s rulings on other aspects of both Apple’s and Samsung’s post-trial motions (see also Dkts. 1981, 2219, 2220), this Court entered an Order Re: Damages (Dkt. 2271). The Court’s damages order let stand the jury’s verdict in the amount of $598,908,892 with respect to 14 Samsung products as to which the jury found no damages or the Court found no legal basis for vacatur or remittitur, namely: (1) the Galaxy Ace, Galaxy S (i9000), Galaxy SII i9100, Galaxy Tab 10.1 4G LTE, and Intercept devices, as to which the jury found no damages;(2)the Fascinate, GalaxyS4G, Galaxy S II Showcase,2 Mesmerize, and Vibrant products, as to which the Court found no legal error in the jury’s calculation of notice date because they involved unregistered trade dress claims that the Court ruled require no notice date; (3) the Galaxy S II Skyrocket, Galaxy S II Epic 4G Touch, and Galaxy S II T-Mobile products, as to which the Court found no legal error in the jury’s damages calculation based on notice date because the Court found no sales prior to the correct notice date; and (4) the Galaxy Tab 10.1 WiFi device, as to which the Court assumed the jury’s damages award was correct without discussion.

By contrast, the Court struck $450,514,650 in damages from the verdict and ordered a new trial on damages as to 14 other Samsung products as to which the Court found that the jury had awarded damages based on a legally impermissible theory, but found that it could not reasonably and fairly calculate an appropriate remittitur, namely: (1) the Galaxy Prevail device, as to which the Court struck $57,867,383 based on legal error in the jury’s award of infringer’s profits for utility patent infringement; (2) the Gem, Indulge, Infuse 4G, Galaxy SII AT&T, Captivate, Continuum, Droid Charge, and Epic 4G products, as to which the Court struck $383,467,143 based on the jury’s legal error in calculating infringer’s profits using incorrect notice dates; and (3) the Exhibit 4G, Galaxy Tab, Nexus S 4G, Replenish, and Transform devices, as to which the
Court struck $9,180,124 based on the jury’s legal error in calculating reasonable royalties based on incorrect notice dates.

The Court’s damages order stated that “[t]he parties are encouraged to seek appellate review of this Order before any new trial.” Dkt. 2271, at 26. In light of the Court’s express request, and because a number of claims in this action have now been finally adjudicated by this Court, Samsung respectfully moves for entry of partial final judgment under Federal Rule of Civil Procedure 54(b), and for a stay of any new trial pending resolution of appeal(s) of the partial final judgment.3

A Rule 54(b) judgment is proper when a court has reached an ultimate disposition of some but not all claims in a case and “there is no just reason for delay.” Fed. R. Civ. P. 54(b). Here, the adjudication of Apple’s claims related to 14 accused Samsung products and Samsung’s affirmative counterclaims is final—there are no unresolved liability or damages issues with respect to any of these products—and there is no just reason to delay entering a partial final judgment on those claims, as doing so will provide the Court with immediate direction from the Federal Circuit that, under the law of the case doctrine, will apply to all further proceedings in this case.

Indeed, the issues that Samsung will raise in its appeal from the partial final judgment on the nine of those 14 products as to which the jury found damages (Galaxy Tab 10.1 WiFi, Fascinate, Galaxy S 4G, Galaxy S II Showcase, Mesmerize, Vibrant, Galaxy S II Skyrocket, Galaxy S II Epic 4G Touch, and Galaxy S II T-Mobile) are likely to affect the necessity for and the scope and contours of the new trial that the Court has ordered.

For example, if the Federal Circuit holds unprotectable any of the Apple intellectual property that underlies both Apple’s claims against the nine products as to which the jury found damages and the 14 products as to which new trial has been ordered, any new trial will not need to address Apple’s claims as to that intellectual property.

For another example, if the Federal Circuit holds that the jury instructions on damages that Samsung has challenged were given in error as to the products on which
judgment can now be finalized, those instructions will need to be changed when damages are retried as to any remaining products. And as one more example, if the Federal Circuit holds that the jury’s award of $381,683,562 in damages as to five Samsung phones (Fascinate, Galaxy S 4G, Galaxy S II Showcase, Mesmerize, and Vibrant) cannot be sustained based on unregistered trade dress dilution alone, or that notice dates do apply to unregistered trade dress dilution, any new damages trial on products accused of trade dress dilution would need to take into account the Circuit’s rulings as to the correct notice dates.

Obtaining the benefit of the Federal Circuit’s holdings before proceeding with any new damages trial plainly would promote judicial economy and efficiency. It would be wasteful to conduct a new trial on the remaining products only later to obtain Circuit guidance that necessitates yet a third trial. By contrast, staying any new trial until appellate direction can be obtained would help avoid the risk that the ordered new trial will, in the future, itself need to be retried or supplemented with still more trials addressing other claims and issues.
______2
The phone referred to in some places in the order as Galaxy SII Showcase and elsewhere as Galaxy S Showcase (i500) is the same phone.

3
Samsung sought Apple’s joinder in this motion, but Apple informed Samsung that it opposes partial final judgment and intends to urge an immediate new trial.

Apple filed an opposition instead, Docket #2288 [PDF], and of course the problem is, what to say to the judge who encouraged them to wait for the appeals court before going to trial 2?:

Apple respects the Court’s desire for appellate review of the March 1 Order regarding damages (Dkt. 2271), but Apple believes that the Federal Circuit cannot review the liability and damages issues that Samsung seeks to place before it pursuant to Rule 54(b). Both Apple and Samsung agree that an interlocutory appeal under 28 U.S.C. § 1292(b) is not feasible and that the Court’s March 1 Order itself is not reviewable. (See Dkt. 2281 at 8.) Samsung has offered only one proposed course of action—which seeks entry of a final judgment on the 14 Samsung products for which the Court upheld the jury’s damages award and a stay of the new trial on damages relating to the other 14 Samsung products—and it fares no better. It does not track the requirements of Rule 54(b), would cause unnecessary delay and judicial inefficiencies, and would not advance the Court’s goal of obtaining Federal Circuit guidance on the March 1 Order’s grant of a new trial or the damages issues it identifies. To the contrary, Samsung’s proposal is likely to lead to a remand without a substantive decision from the Federal Circuit. For these reasons, Samsung’s motion should be denied, and the Court should schedule a new trial on the remaining damages issues, after which final judgment may be entered as to all claims in the case.

So its argument is that the federal appeals court probably won't do anything because any appeal will just be dismissed for lack of jurisdiction. So it suggests going forward immediately with the damages retrial.

In seeking to avoid entry of partial final judgment and immediate appellate review of liability and damages rulings that would significantly affect the necessity and scope of any new trial, Apple adopts an unduly narrow interpretation of Rule 54(b) that is unsupported by any authority, disregards the manner in which the case was tried, and ignores the substantial efficiencies that would be gained by entering partial final judgment now. There is ample support for entering judgment on the product-by-product basis that Samsung proposes, particularly because the jury returned its verdict on that very basis. And a stay of a new trial pending appellate review of the partial final judgment would not cause useless delay, as Apple suggests. Instead, a stay would allow the Court to receive direction from the Federal Circuit regarding issues of patent validity, trade dress dilution, and design patent scope, among others, that are likely to affect the necessity for, the contours of, and jury instructions at the new trial that the Court has ordered. Obtaining the benefit of the Federal Circuit’s holdings before proceeding with any new trial plainly would promote judicial economy and efficiency, and it would be needlessly wasteful to conduct a new trial now only later to obtain Circuit guidance that necessitates yet a third trial. The Court should direct entry of partial final judgment forthwith and stay further proceedings pending resolution of the appeal(s) from that judgment....

Finally, Apple contends (Opp. 13-14) that there will be no efficiency gains from entering judgment now because any appeal will just be dismissed for lack of jurisdiction. This argument is of course circular and, as discussed, reflects a flawed understanding of Rule 54(b)....

Apple also wrongly opposes (Opp. 11) entry of a Rule 54(b) judgment on the ground that, unless the Federal Circuit invalidates all of its intellectual property, it will still be necessary to hold a new trial following which the parties could pursue another appeal. Apple misses the point. Since, by definition, a Rule 54(b) judgment resolves only some claims in a case, it is always true
that a court will have claims left to resolve after entering a Rule 54(b) judgment. And Apple ignores the law-of-the-case doctrine in arguing that the remaining, non-final claims will require the Federal Circuit to address the same issues twice. As Samsung explained (Mot. 11), to the extent that the Federal Circuit addresses in the first appeal issues that also affect any of the products as to which judgment would not be entered under Rule 54(b) (e.g., invalidity of the underlying intellectual property, instructional issues, and damages issues like causation, apportionment or trade dress notice), the Federal Circuit’s decision would apply to those products under the law of the case doctrine.

Apple also filed a motion seeking an April 3rd hearing conference, Docket #2283 [PDF], to get an immediate retrial on damages going:

Pursuant to Civil Local Rule 7-11, Apple requests a case management conference on April 3 to address issues arising out of the Court’s March 1 Order re: Damages. Joint statements would be filed seven days in advance on March 27, 2013.

On March 1, 2013, the Court granted Samsung’s motion for a new trial on damages as to 14 infringing products and confirmed a $598 million damages award for the remaining products. (Dkt. 2271 at 26.) The Court also held that Apple should receive prejudgment interest and supplemental damages for the products that are the subject of the $598 million verdict but deferred a decision on the specific amounts. (Id. at 2, 6-8.) The Court encouraged the parties “to
seek appellate review of this Order before any new trial.” (Id. at 26.)
Apple takes seriously the Court’s encouragement, but after careful analysis, Apple
believes that until the damages retrial is held and supplemental damages are decided, appellate
review of the March 1 Order will not be obtainable. No final judgment exists to ground an appeal
because the March 1 Order directs further proceedings in this Court. Apple researched avenues
for an interlocutory appeal of the March 1 Order, but none proved viable. The likely result of an
attempt would be a dismissal of the appeal without a substantive decision. That would only
further delay a conclusion to these proceedings. Thus, while interlocutory review may seem
inviting, Apple believes attempting it would be futile and would only cause delay.
Samsung intends to file a motion that seeks entry of partial judgment under Rule 54(b).
Apple believes that attempting appellate review through that vehicle would also likely lead only
to dismissal of the appeal with no substantive decision, and hence will oppose such a motion.
Apple asked Samsung to agree to request a prompt case management conference and
provided to Samsung a draft of a joint statement as contemplated by Local Rule 16-10(d).
Samsung declined a conference until no earlier than late April, declined to file a joint statement,
and declined to discuss a schedule for a new trial, even assuming that appellate review is not
possible.
Of course, Samsung benefits enormously from any delay, even delay resulting from a
failed attempt at an immediate appeal. Samsung must now pay $600 million, and it faces the prospect that it will be liable for hundreds of millions more following a new trial. Moreover, despite the jury’s verdict and Samsung’s representations to the Court that an injunction was unnecessary because Samsung was discontinuing all infringing products and implementing design-arounds (Dkt. 2054 at 13-14), Samsung continues to sell the same and additional
infringing products without making any payment to Apple. Every day that a final judgment is deferred, Samsung benefits. Further delay is fundamentally inconsistent with the patent system, which confers the exclusive right to use the patented invention or design and entitles the patentee to money damages for any past infringement. Further delay is fundamentally unjust. Samsung has infringed and
continues to infringe, but it faces no immediate consequences. Under these circumstances, a prompt case management conference and a prompt new trial is appropriate so that the case may proceed to a final judgment.

It thought about the judge's encouragement to wait for the appeals court to review, Apple is saying, but it thinks that would be unfair to Apple. After all, delay means Samsung doesn't have to pay anything immediately. That's an odd thing, in that it doesn't have to pay until after the appeal anyhow.

And the new damages from a second trial could be even higher, Apple argues. Samsung, of course, thinks that is possible too, if the playing field remains as tilted as it was on the first trial. Remember when John Quinn said to the judge, "Why even have a trial?" when she denied allowing in certain evidence? Clearly, Samsung felt and feels that it was not given a fair shake, and Apple's desire to keep things that same way speaks volumes.

Apple seems to desire a PR victory. By that I mean, even if Apple gets its way and the new damages trial happens immediately, let's even posit that a new jury orders a zillion buckets of gold be paid to Apple, Samsung still doesn't have to pay immediately, because it will certainly appeal, so Apple's arguments are little peculiar to me, until I recall that nothing is likely to go Apple's way on appeal the way it did in the district court. There isn't a collection of judges anywhere on planet earth that would give a stamp of approval to everything the biased and incompetent jury did in the first trial, and frankly, I believe Apple knows it, and that this is why it wants a quick damages resolution by a second jury, even if it knows there won't be any immediate consequences to Samsung and nothing for Apple other than PR, if it can prevail with a second jury. The public won't in general follow after that, so when the appeals court reduces, if it does, the ultimate damages or even removes them entirely, it will be a long time down the road. Meanwhile, Apple can tell judges all over the world, not to mention the public at large, about its "victory". It probably figures it would rather take its chances on an unskilled jury than on skilled and experienced patent law judges at the Federal Circuit.

Apple’s Motion pays lip service to the Court’s express request that the parties seek appellate guidance regarding its Damages Order before any new trial, but then argues that such a course of action is not possible. It is. Apple ignores precedent holding that it is proper to enter a Rule 54(b) judgment in a patent case where there is a final determination as to some accused products and not others. As discussed below and in Samsung’s Motion for Entry of Partial Judgment Pursuant to Rule 54(b) and for Stay Pending Appeal (“Motion for Partial Judgment”), Dkt. 2281, all of the requisites for entering a Rule 54(b) judgment are met here. Contrary to Apple’s claim that doing so would cause undue delay, a Rule 54(b) judgment will help ensure that there is, at most, one new trial in this case, and will ensure that the Federal Circuit can consider liability and remedies together in a consolidated appeal that will give guidance for any new trial.

Apple asserts that preparation for the new trial will be simple and can take place in short order. That is incorrect. The contours of the new trial still need to be determined and will involve the resolution of complex issues, including critical Constitutional issues. For example, under the Seventh Amendment, Samsung has a right to a new trial on liability and damages for products that will be the subject of the new trial under the Seventh Amendment. As a result, the trial will not be nearly so limited as Apple assumes. In addition, Apple’s expert witness Mr. Musika has died. Assuming that Apple intends to introduce a new expert witness, new expert reports, depositions and related motion practice will have to precede any new trial. In contrast, entering a Rule 54(b) judgment first and allowing any appeal(s) to run their course is the more efficient course of action.

Apple then filed a request to file a one-page reply, Docket #2287 [PDF]:

Apple’s proposed reply brief focuses on the purpose of Apple’s Motion—which requests that the Court hold a case management conference on April 3, with joint statements to be filed on March 27, 2013. The reply shows that Samsung’s lengthy Opposition does not engage Apple’s straightforward request, and instead confirms the need for a case management conference by arguing Samsung’s positions about the scope and procedures for the new trial required by the Court’s March 1 Order re: Damages. The reply further shows that April 3 is not too soon for a conference, as the Opposition makes clear that Samsung has developed its views about whether and how the case should proceed, and Samsung will have filed its reply on its motion for partial judgment by March 29.
The proposed reply does not respond to the substance of Samsung’s arguments, which Apple will address in the meet and confer process and the parties’ joint statements in connection with the case management conference.

The problem Samsung sees, in its Reply, is this:

While Apple’s proposal of
proceeding to new trial now without any appellate guidance would undoubtedly cause the second
trial to take place sooner than if the parties await resolution of an appeal of a partial final
judgment, it also increases the possibility that there will be preventable errors during the second
trial that will necessitate yet a third trial.

For good measure, just in case the judge were to grant Samsung's motion for partial judgment and stay, Apple then filed a motion for leave to file a motion for reconsideration of the judge's ruling granting a new damages trial with regard to the Galaxy II S AT&T and and the Infuse 4G, Docket #2289 [PDF]:

Contemporaneous with this filing, Apple has opposed Samsung’s request for entry of judgment pursuant to Rule 54(b). If despite that opposition, the Court intends to enter a judgment pursuant to Rule 54(b), Apple moves pursuant to Civil Local Rule 7-9(a) for leave to file a motion for partial reconsideration of the Court’s March 1 Order (Dkt. 2271) and for reinstatement of the jury award of $85,287,330 for the Galaxy S II AT&T and Infuse 4G, two of the Samsung products for which the Court ordered a new trial on damages. Apple seeks leave to move for partial reconsideration pursuant to Local Rule 7-9(b)(3), for the reasons explained below.

The Court ordered a new trial because it believed that at least some sales of these products came before Apple’s April 15, 2011 complaint, which the Court held gave Samsung notice of its
infringement of the D’677 Patent. (Dkt. 2271 at 22:23-24.) In fact, Samsung stipulated in the pretrial order that all sales of the Galaxy S II and Infuse 4G began after April 15, 2011. (Dkt. 1189 at 11-12.) As the Court recognized, notice in the complaint gave Apple a right to recover Samsung’s profits from sales of these two products after this date. Apple’s opposition at pages 15 to 17 includes further discussion of the basis for and undisputed facts supporting Apple’s request. To the extent that the Court now confirms the jury’s verdict for the Galaxy S II AT&T and Infuse 4G pursuant to this motion, supplemental damages should also be added for the Galalxy S II
AT&T in light of the March 22, 2013 Declaration of Corey Kerstetter, confirming that additional sales of a version of this model occurred after the jury entered its verdict. (Dkt. No. 2286 ¶¶ 4-5.) Reconsideration of the new trial on these products is warranted under Civil Local Rule 7-9(b)(3) due to the error regarding the date of first sale for these products in light of stipulated facts.

Accordingly, Apple respectfully requests that the Court grant Apple leave to file a motion for reconsideration and that the Court reconsider its March 1 Order as to these two products, reinstate the jury award of $40,494,356 for the Galaxy SII AT&T, and $44,792,974 for the Infuse 4G and calculate supplemental damages for the Galaxy S II AT&T.